Comparing Cash-on-Cash Return Across My Portfolio

When I ran the cash-on-cash numbers on all 9 of my rental properties last winter, the spread surprised even me: my best unit returns 14.2% a year on the cash I put into it, while my weakest one limps along at 3.8%. Same landlord, same 15 years of experience, completely different results. That gap is why I stopped judging a property by its rent roll alone and started judging it by what my actual cash is doing for me.

Cash-on-cash return is simple: annual pre-tax cash flow divided by the total cash I actually invested, meaning the down payment, closing costs, and any renovation money spent before the first tenant moved in. It ignores appreciation and loan paydown entirely, which is exactly why I like it. It tells me how hard my cash is working right now, not some theoretical future value ten years down the road.

Why I Rank My Portfolio This Way Instead of by Rent

For years I compared properties by monthly rent, which is a mistake I see a lot of new landlords make. A property renting for 120,000 yen a month sounds better than one renting for 85,000 yen, until you realize the first one cost me 9,600,000 yen in cash to acquire and the second cost me 3,400,000 yen. Cash-on-cash strips that illusion away and forces an apples-to-apples comparison across very different purchase prices and financing structures.

How I Calculate It for Each of My 9 Units

Every January I sit down with a spreadsheet and run the same formula for each property, in this order:

• Annual rent collected, minus vacancy, using my actual trailing 12-month vacancy rate rather than a guess
• Minus operating costs: property management fees, insurance, fixed asset tax, and a maintenance reserve of 8% of gross rent
• Minus loan interest and principal payments on any property carrying a mortgage
• That result, divided by my total cash invested at the time of purchase

I keep the 8% maintenance reserve consistent across all 9 properties even though real repair costs swing wildly year to year, because otherwise one lucky year on an older property makes it look artificially strong.

How Financing Changes the Comparison

Leverage is the biggest variable in this whole exercise, and it deserves its own line item. Two of my 9 properties are financed at around 80% loan-to-value, while the other 7 are either fully paid off or close to it. The financed units actually produce a higher percentage return on the cash I put in, because I am using the bank’s money to buy more property than my own cash could reach alone. But that higher percentage comes with a thinner monthly cash flow buffer, since roughly 45% of the rent on my financed units goes straight to the mortgage payment. When I compare cash-on-cash across the portfolio, I always note next to each number whether the property is leveraged or not, because a 9% return earned with a mortgage and a 9% return earned in cash are not the same risk at all.

My Best Performer: An Older Duplex

The strongest unit in my portfolio is a small duplex I bought 11 years ago for 3,400,000 yen in cash, no mortgage involved. It rents for 85,000 yen a month combined across both units, and after expenses it clears roughly 480,000 yen a year, which works out to a 14.2% cash-on-cash return. I bought it below market because the previous owner had let the exterior siding go, and I fixed that myself over two weekends for about 60,000 yen in materials. Buying a slightly neglected property and fixing it myself is the single biggest lever I have for pushing cash-on-cash above 10%.

My Weakest Performer, and What Went Wrong

My lowest performer is a newer-build unit I bought 4 years ago with a mortgage, mostly because I got impatient and skipped my usual walk-through checklist. It looked clean, so I financed 85% of the 12,000,000 yen purchase price. The rent is solid at 78,000 yen a month, but between the mortgage payment, a 5% property management fee, and higher fixed asset tax on the newer structure, it only nets about 3.8% cash-on-cash. It is not a bad property, just a mediocre use of cash compared to buying older stock and paying down debt myself over time.

Renovation Spending Changes the Math More Than People Expect

Every renovation yen goes straight into the denominator, so it directly lowers cash-on-cash unless it lets me raise rent enough to offset it. Two years ago I spent 420,000 yen redoing a kitchen in one unit, which raised the achievable rent by 8,000 yen a month. That works out to only a 2.3% return on the renovation spend by itself, which told me a lighter refresh would have made more sense than a full kitchen swap. Now I run a quick check before any renovation over 200,000 yen: monthly rent increase times 12, divided by the renovation cost. If that number comes in under 8%, I scale the project back.

What I Would Tell a New Landlord

If I were starting over with one property instead of 9, I would track cash-on-cash from day one instead of waiting years like I did. It changes which properties you buy, how much you are willing to pay, and when a renovation is actually worth doing. The properties that made me the most money were the ones where the cash-on-cash math was already good before I touched anything with a hammer. The renovation just made a good deal better; it never rescued a bad one. I also review my bottom two performers every single year before I look at anything else, because that is where the temptation to buy another property distracts me from fixing what I already own.

That’s the approach I use across all 9 of my properties every January, and it’s the single number that tells me faster than anything else which units deserve more of my time and which ones I should just leave alone.

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